The glossy sheen Apple (AAPL) has so brilliantly bestowed upon its iPhones and iPads is apparently wearing off its share price.

Apple stock fell well below $500 on Tuesday, shedding $200 billion in market value since peaking at more than $700 a share shortly after the launch of the iPhone 5 in September. Analysts were all over the map trying to decipher what's really going on with the world's most valuable company, even as Apple faces intense competition from rivals like Samsung, which has taken the lead in the smartphone race.

As Apple prepares for its closely watched earnings report next week, many wonder what this steady decline might mean for both Apple's future and for the people who buy and sell its shares.

"I think there's a material psychological impact here for Apple investors because there's been this aura of invincibility to the company that has now come off," said John Jackson, an analyst with IDC in Boston. "But then you could have seen this coming because it's only reasonable to expect some maturation of Apple's formula. They set a cadence of innovation and disruption for years, and now this price drop shows Apple is simply a victim of its own successive successes."

Panicking investors

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Tuesday's slump, which followed a dip Monday after news reports indicated Apple was cutting parts orders for its iPhone 5 due to sagging demand, was undoubtedly a concern for institutional investors with massive holdings in Apple stock. But those investors, including pension and mutual funds with multibillion-dollar interests in Apple, may not be responsible for the stock's sharp decline.

"The big funds mostly hold; they don't play the retail game, which is buy and sell every other day," said Tim Bajarin with Creative Strategies. "And when I talk to the institutional investors that have a lot of Apple stock, they keep telling me they see Apple as a good buy and one that continues to be a good value."

Many analysts, instead, say it's the smaller retail investors who are panicking, perhaps giving up on Apple a bit too soon.

Apple's near-term fate should become much clearer Jan. 23 when the Cupertino tech giant announces its first fiscal quarter results. Many analysts, including Bajarin, expect the company to surprise those investors who have jettisoned Apple shares in recent months over concerns about how swiftly smartphone rivals have robbed market share from the iPhone-maker.

"We have every indication that both the iPhone and iPad Mini continue to be in strong demand going into the current quarter," Bajarin said.

Apple this week declined to comment on reports it was cutting orders of iPhone screens and other components, news attributed to anonymous sources that helped pull Apple shares down dramatically in recent days.

Word that Apple had halved its original order of 65 million iPhone 5 screens due to weak demand, as reported in both a Japanese daily newswire and The Wall Street Journal, has been widely questioned by many bloggers and analysts who feel the 65 million figure is unbelievably high and probably wrong.

"I don't know if it was actual manipulation of some kind, but whoever put out that story clearly gave false information and it had a ripple effect in the market," said Bajarin, adding that nobody except Apple knows for sure the original and reduced size of its parts order. Many observers who study Apple's supply chain are convinced that any reduced work order was the result not of weak demand but of improved performance by manufacturers to crank out the shiny LCD screens.

The $500 barrier

Some institutional investors, to be sure, have been moving out of Apple. After all, the analysts' consensus forecast has Apple posting a year-over-year decline in earnings for the first time in a decade when it announces earnings results next week. And Apple had warned last fall that its margins would take a hit because of the simultaneous launch of several products, including the iPhone 5 and iPad Mini, which may have caused distractions among consumers and hurt sales.

Apple, whose stock slumped more than 3 percent Tuesday to close at $485.92, declined to comment for this report.

But clearly there is much afoot with Apple stock. A survey of more than 800 mutual funds by Bernstein Research indicated what it called "a transition in share ownership" throughout the past year. The study shows the percentage of growth-based mutual funds that own Apple has dropped while value-based funds have seen their market share of Apple increase, suggesting investors were switching gears in how they view the company's future.

Meanwhile, many retail investors have been dumping Apple stock, helping to shove the share price onto the skids. They see increasing competition -- including buzzed-about products like new offerings from Google (GOOG), Samsung and Research In Motion -- as threats to Apple's dominance in the smartphone market.

"Apple's down almost 9 percent already for this year, and I think that psychologically that $500 mark was a big barrier," said JJ Kinahan, chief derivatives strategist for TD Ameritrade, a retail brokerage house. "Many investors thought shares would hold at that point. But from a technical standpoint, which looks back at how a stock has performed in the past, people are now looking at $465 as where they expect Apple to bounce back up. If that doesn't happen, the next point they're looking at is $440.

"There's a feeling among many retail investors," Kinahan said, "that the safety they once had with Apple has now been jeopardized."

Contact Patrick May at 408-920-5689. Follow him at Twitter.com/patmaymerc.